CBI Probes ₹95 Cr PMDO Diversion: Hyd EPC Firm Under Lens

The Central Bureau of Investigation has registered a case against Rajahmundry-based Yuvaraj Power Projects and Hyderabad-based EPC contractor Pratham Envirotech Engineers, alleging a coordinated diversion of ₹95.2 crore in Pooled Municipal Debt Obligation (PMDO) financing meant for solid waste composting facilities and a 13 MW power plant.

The FIR, filed on a complaint by India Infrastructure Finance Company (IIFCL), names 16 accused. These include Yuvaraj Power Projects' CMD Venkata Satyaramu Maddipoti (MVS Ramu), six directors, two sponsors, statutory auditor J Praveen of JBRK and Co., cost accountant R Sreenivasa Rao, Pratham Envirotech Engineers and its MD Venkata Mallikarjuna Reddy Yannam, and unidentified public servants.

Provisions of the Prevention of Corruption Act have been invoked against the unknown officials for alleged abuse of position during credit sanctioning.

The numbers are stark.

Of the ₹88.2 crore disbursed under the facility, forensic analysis traced ₹59.5 crore — nearly 67% of all disbursed funds — to a single current account held by Pratham Envirotech Engineers at an Axis Bank branch in Gachibowli, Hyderabad.

From there, approximately ₹12.8 crore was allegedly routed onward to entities in which Yuvaraj Power Projects' directors held interests. Investigators describe the pattern as circular transactions and layering designed to obscure the trail.

IIFCL, which sanctioned ₹6.4 crore and disbursed ₹5.1 crore as its share in the lending consortium, now carries an outstanding exposure of ₹20.6 crore including accrued interest as of May 2026.

The complaint originated from IIFCL's NPA management division, confirming the account had already deteriorated before criminal proceedings commenced.

False and forged utilisation certificates were allegedly submitted to conceal the diversion.

When nearly two-thirds of disbursed funds flow to a single contractor account and then layer into related-party entities — bypassing genuine project execution entirely — it exposes a structural vulnerability in how pooled municipal debt is monitored post-disbursement.

Implications for Infrastructure Financing

For infrastructure lenders, the case underscores the limits of relying on utilisation certificates without independent verification of actual fund application. It also raises uncomfortable questions about the independence of lenders' engineers and statutory auditors when borrower-contractor relationships go insufficiently scrutinised during credit appraisal. The naming of the statutory auditor and cost accountant as accused suggests the investigation will not limit itself to the borrower and contractor alone.

For EPC contractors operating in the municipal infrastructure segment, the downstream effect is predictable:

- Tighter end-use audit requirements
- More aggressive clawback provisions in contract terms
- Closer examination of contractor-borrower linkages during project finance structuring

The days of lenders treating the EPC contractor as a neutral execution counterparty — without examining commercial entanglements with the borrower — may be numbered.